People tend to have a proprietary feeling about their neighborhoods, particularly when they have large sums of money on the line thanks to their investment in their home. This feeling leaves urban property rights in a gray area. Residents are remarkably willing to dictate to private property owners what can and can’t be done with their land. They’re willing to approve restrictive zoning rules and lobby against permitting in ways that dramatically reduce potential land value, without ever dreaming of compensating owners and would-be developers.

Finally, an honest sign

Developers have to cultivate local political and civic relationships, find equity investors, locate sites appropriate for developing, obtain entitlement approvals, and secure a whole passel of capital before they can turn one shovel of dirt. Affordable housing developers often have three or four (or ten) extra steps, cobbling together political support (which always has a cost) for zoning changes and securing a complete financing package. All of this takes months or years, for every project. NIMBYs, on the other hand, they just need to go to Kinko’s, run off a few hundred flyers, and organize a few vocal folks to attend a couple planning commission or city council meeting to derail a project.

The low cost of entry creates an assymetry, a severe market breakdown, regarding the rights of a property owner. NIMBYs right to oppose a project, on rational or irrational grounds, should not be abridged; however, their intrusion on the property rights of another landowner should not be so low-cost to them. When narrowly interested parties in California, for example, want to put issues to the voters – the dreaded ballot measure – there is a significant cost in securing enough registered voter signatures to qualify, though that costs varies widely at the local vs. statewide level. Some argue that even that cost is too low, but at least there is a cost, so the proponents of a ballot measure have some “equity” at risk.

What would be an appropriate mechanism to correct the market for NIMBYs? A Pigovian tax. NIMBYs create a negative externality on the property rights of an owner. The creator of the negative externality should have to pay that cost. How much should they have to pay to compete in this marketplace of ideas? That is an interesting question.

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